Skip to main content

tv   Bloomberg Markets European Open  Bloomberg  July 17, 2019 2:30am-4:00am EDT

2:30 am
anna: good morning. welcome to "bloomberg markets: european open." today the markets say get ready for a world of hurt. than arer fed cuts currently forecast could send treasury yields tumbling to negative real rates, joining the rest of the developed world. europe points lower ahead of the cash trade. we are just 30 minutes away. anna: a long way to go.
2:31 am
president trump threatens further tariffs on chinese imports. pres. trump: we have a long way to go. another $325 billion we can put a tariff on if we want. china and ang about deal. i wish they did not break the deal we had. anna: ursula von der leyen clinches the eu top job. >> we have issues, but we should never forget we are allies with the u.s. and we are friends. we sit on the same side of the table. anna: plus, asml forecasts sales trade tensions hammer the -- but dialogue semi-beat expectations. plenty talk about -- plenty to talk about. good morning. matt: u.s. ten-year debt
2:32 am
approaches, once again, dipping down into negative real rate. andsee that across europe the u.k. already. even nominal rates in germany are negative out for 20 years. this is becoming a global issue. interesting to watch central bankers continue to talk about cuts. down even drive rates further. leaving more of the world holding paper. governmentsgood for if they would borrow and spend. take a look at futures this morning as we prepare for the open, 18 minutes away now. ftse, dax, and cac futures not showing a lot of direction. the market really searching for a narrative, looking for direction. you have red arrows here. down 0.3%.e futures what else do you see on the gmm? anna: this is reflecting the
2:33 am
treasury markets. an interesting conversation being had about whether lower rates beget lower rates. we will talk about that. let's show you the gmm. a mixed picture. a fairly unconvincing picture on the overnight session from asia. markets are confused. a little bit lacking in a definitive narrative. on the one hand, the data picture continues to build. just yesterday, the retail sales number out of the u.s.. that data not looking bad, really. you said that against the ongoing rhetoric around trade, we just heard from president trump in the headlines, it means investors are in search of narrative. this is the mixed sure on the gmm right now. lots being said about treasuries. indeed, the pound does not feature here because we have seen quite a lot of weakness. a 124 handle on sterling as we see the times in london talking
2:34 am
about whether we are going to see an early election call by a new leader in the u.k.. a lot to talk about in terms of the new deal brexit risk for market participants. bloomberg mliv managing editor is in singapore for us. let us start with the question of the day. comments on trade from president trump are really putting that back on the agenda once again. the question you have been throwing around is how will markets react to trump announcing increased tariffs on china? it is easy to focus on risk aversion. we have to think about where we are on equities. we have been touching all-time highs of late. thehat is very important in context of where we are looking. to be away from most of my colleagues. most of my colleagues think we have gotten used to the trade war yields. the fact is equities being at a all-time high shows they will quickly move on from increased tariffs.
2:35 am
they do not think it will be that much of a scare. that is why they think the threat is not that much of a scare. i think more tariffs will be very damaging. i don't think we have seen the economic effect from the last round. that will start to feature. overall, we have not seen the full impact of the tariffs already in place. i think it would be cataclysmic for asset markets because the consensus narrative is there is this trade truce. is it china and u.s. are ultimately going to reach a deal? it is not that trade tensions will escalate. definitivelyet more tariffs implemented, that would be bad news for assets. especially with equity that all-time highs and valuations looking expensive. >> for equities, a correction would not hurt if you have been long all year. on the csi 300, you are up 26%. you are up 20% on the major
2:36 am
developed index as well. it would take a bear market to really hurt investors. is that the damage you think could be done? does the year to date number -- that had amassed collapse at the end of last year. it is slightly arbitrary taking from the low point. some peoplest in benchmarks, but not necessarily weaker in the last couple months. we are just over 2% higher than we were 11 weeks ago. it is not that the s&p is higher. we got quite high in september, october of last year. it needs to look for a different window rather than saying 20% would require damage. can we get a bear market? we get moreill if tariffs. we are already at risk of severe correction. auger -- that august,
2:37 am
september period onward. we are going to get that slowdown and that will lower economics forecasts, and earnings guidance. we are already due for a pullback later this year. if we get a combination of extra tariffs, markets will start realizing we are not getting a deal before the election next year. if we are getting extra tariffs, we are moving farther from a deal, not closer. that would change the narrative. we could get a bear market quite easily in equities if that happens. what are you making of the better data out of the u.s.. the job story is old news. retail sales, how does that fit into your bearish view of the world? how do you see it impacting treasuries? going toury market is cut out the extreme scenarios. mark: three points of data are important.
2:38 am
i am less worried about the jobs. the jobs data is clearly slowing down. it is clearly slowing down over the last couple months. jobs really only start going back when the recession is pretty much already here. i'm not worried about the jobs thing. the retail sales slightly better than expected, bloomberg economics did predict that. it is in line with what bloomberg economics productive. it is a volatile series. the one that is most relative -- most relevant if you are bullish is the new york empire. how will this affect treasuries? even in my bearish view, the market is overpriced for immediate cuts by the fed in terms of hoping there might be more than 50 -- more than 25 basis points in july. it is unlikely there is more
2:39 am
than 25 basis points. the market is set up for a rate repricing higher, which will make it harder for equities. it is important to emphasize that while i am structurally very bearish on equity markets, it is looking for the economic data to feedthrough more like august, september. we may get more forecast down in a couple weeks if there is no sign of any deal on trade. likely august, september is when we see the data turned down. matt: thanks for joining us this morning. thember, you can join debate on today's question of the day. how will markets react if trump announces increased tariffs on china? don't just say they will be selling off. we want to know -- we want you to quantify it for us. reach out to was at the mliv team, ib+tv on your bloomberg terminal. let's get the first word news now with debra mao in hong kong.
2:40 am
has been von der leyen confirmed as the new president of the european commission. she is the job and the first german in over 50 years. she told lawmakers the most pressing issue is climate change and that she would seek to bolster relations with the united states. >> we do have issues. we should never forget that we are allies and we are friends. we sit on the same side of the table if i may put it that way. we have to negotiate hard about the different topics that have to be fought. in the end, we know it is better to be trading with each other. condemn.s. has voted to comments from president trump that have been dubbed racist. he tweeted that four congresswomen should go back to where they came from. trump says he was not racist and does not have a racist bone in his body. he says of the lawmakers, it is
2:41 am
my opinion they hate our country. likely suffering its worst downturn since the 1990's when it was battling floods, drought, and famine and may have lost as much as 10% of its population. the bank of korea estimates it contracted by 3.5% in 2017, leaving north korea's economy roughly the same size as the u.s. state of vermont. rankedtes has never lower than number two in the seven year history of the bloomberg billionaires index until now. he has been overtaken by bernard arnault. his company's shares rose to a record pushing his net worth to more than $200 million ahead of gates. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more this is countries bloomberg. anna: thanks very much.
2:42 am
next, goldman sachs is trading revenue is a bright spot. bill jp morgan's profitability improve? more on wall street next. bloomberg radio is live on your mobile device or dab digital radio in the london area. they will be covering the banking story as well. ♪
2:43 am
2:44 am
2:45 am
matt: welcome back to "bloomberg markets." this is "the european open." we are looking at equity index futures pointing lower. let's take a look at those futures. 0.2% on the ftse down. a quarter percent on the ftse down. really, little changed, still pointing lower. results. to earnings only two major u.s. banks are left to report this week. for the ones that have, lower interest rates and lower trading revenue are starting to bite. citigroup set the tone with soft trading results. heavy cost cuts and a booming consumer business helped lift shares. goldman sachs bucked the trend. it surprised investors, beating expectations thanks to a jump in its equities trading business. wells fargo posted its smallest lending income since 2016. snapped a three
2:46 am
year streak of gains for its net interest income. still left to report, bank of america, morgan stanley on thursday, for now, the question remains. how will they bolster revenue when trade is suffering? joining us is bloomberg senior finance editor. pleasure to see you so early this morning. inks for joining us. what have been the consequences? what are we seeing in the results here that suggest a low interest rate environment? >> they will continue to struggle. the margins will be squeezed. they have had certainly nice tailwinds for the past few years as the fed has cranked up interest rates. they have kept the deposit rates on hold and increased lending rates. they have had a nice profit bump. now it's going to start going the other way.
2:47 am
as we have seen in the u.s., the u.s. consumer is doing very well. with lower borrowing rates, the theory goes, that will give a little philip to borrowing, to spending on credit. it might make up an revenue what they lose in margin. matt: what is going on -- that , the tailwind jim they got from rising rates is now starting to stay -- starting to fade, if the headwind they faced with weak trading revenue would also start to fade a little bit. why is trading revenue continuing to be a problem for everybody but goldman sachs? >> trading is a black box. volatility is up. volatility is down. whenrs complain about there is not enough volatility and they complain when it is the wrong kind of volatility, but
2:48 am
you have crowded trades. you have very tough environment to make money in bond trading, in equities, you have very crowded trades and very high compliance costs. you have spending on technology to automate more and more of the trading functions. there is a squeeze on the revenue side, and increase on the cost side, and there you have it. it is an area where you are always rife with surprises. anna: low volatility in fx markets is a feature of certain -- of recent quarters. income,net interest cuts and guidance, one of the gloomier ends of the story for the bank. does that change expectations around the banks that have yet to report? >> i would have thought so. a lot of this stuff is priced in any way.
2:49 am
the markets are anticipating it. unless you get a massive surprise one way or the other, you are probably not going to see a lot of share reaction. for u.s. banks, the silver lining is they are not in europe. anna: there we are. matt: we seem to be stuck in a negative rates trap. bloomberg's finance editor joining us on u.s. earnings results, but on the global picture, those negative rates are for many regions outside the u.s.. as we heard from jay powell, they may be cutting soon as well. let's get the bloomberg business flash. full-blown eus a antitrust probe as the competition chief prepares a finale to her five-year crackdown on u.s. tech giants.
2:50 am
activist investor bill ackman has an activist of his own. owns -- it investors is now pushing back against the decision to issue $400 million of 20 years at without consulting shareholders. it wants bill ackman to halt the plane and pursue a more active buyback program. lotus has unveiled its first all electric supercar. it will cost $2.1 million. it has no handles. it stores are operated by a keep up. -- it's doors are operated by a key fob. >> obviously selling tua limp -- selling to a limited base. it is illustrated the capability of lotus, investing in a long-term plan. this is the first car of a
2:51 am
long-term business plan. >> that is your bloomberg business flash. minutes away from the european market open, we will take a look at your stocks to watch for this trading day, including the european automakers after sales fell in june with the biggest drop of the year. more on that next. ♪
2:52 am
2:53 am
2:54 am
anna: welcome back to "bloomberg open." european swedbank latest, annemarie. >> we have seen a lot of calls for this to be called down this morning. they beat the highest estimates when it came to earnings. they are slashing dividends. this is a bank dealing with the fallout of a money laundering scandal. the ceo spoke to bloomberg daybreak about that. take a listen. there is a fine, we will pay that. exactly how that will pan out, it is too early to say. to build atant buffer in the environment we are in. matt: let's get over to jp bernard. what is the story?
2:55 am
>> asml reported earnings. we have a mixed picture. third quarter was a little bit weak. second quarter was ok. analysts are divided on how you take this number. another semiconductor processor reported earnings as well, which was dialogue some in germany. emi in germany. anna: thanks very much to you both. thanks for joining us with stocks to watch. first to go is the function on your bloomberg. watch out for the car sector as well. car registrations pretty sharp. that's something we are going to be talking about. erickson in focus. second quarter operating profits below estimates. reported a 5% position. distributionemical
2:56 am
company outlook, we will focus on germany and the earnings story shortly. the market open is next. futures will be weaker at the start of trade. ♪
2:57 am
2:58 am
2:59 am
anna: a minute to go until cash equities trading on this wednesday. welcome back to the europe market open. the pacific down a touch. very unconvincing picture. pulled in two directions. still the trump trade narrative and power story, we'll be talking about that again. look at the pound. this is the pound sterling. london trade is waking up to further headlines around no-deal brexit and what would oris johnson's consensus be? we're on 2.09. the yield a bounce off those
3:00 am
lows. what does that mean for the global economy and the negative rates narrative. we'll talk about that later. the european equity market a little weaker as well. let's see how the european equity markets open up. we're also focusing in on the earnings story of course. we have a number of earnings reports. they will react to their underlying performance. to the extent they are hit by the trade wars, the global slowdown. this is the picture as we get the equity markets opening up. the ftse down 1.2%. as is the spanish ibex. we wait for the german and french market to open up. the auto sector also really in focus today. we're talking june e.u. car registrations.
3:01 am
financials fairly mixed. healthcare looking overly green. areas of red, consume discretionary. a very mixed picture going on here, matt. matt: yeah, absolutely. looking at swedish -- boosting its full-year forecast. up 10.6%. we talked about asml as well. it is gain lake-effect less but it is a much bigger company. it is adding more points to the sox 600. you see a number of companies out with earnings today. swatch. louis vuitton. hennessy all on the gaining side of the ledger. total and shell. the three oil companies down on
3:02 am
the privers oil. then you see eriksson falling. more than 2.5%. we just had an interview with the c.e.o. of eriksson. earnings helping and hurting today, depending on where you are. seemingly difficult to be in scandinavia putting out earnings as long as you're not wedish or finnish. u.s. futures pointing higher still as the american consumer proved its resilience or as the american consumer proved his or her resilience, fed chair jerome powell said the fed would continue to monitor downside risks to the economy. >> outlooks have increased, particularly regarding trade developments and global growth. issues such as the debt ceiling and brexit remain unresolved. participants have raised
3:03 am
concerns about a shortfall inflation below our 2% target. matt: joining us now is the global head of debt strategy at nat west markets. chicago fed president charlie evans said there is an argument if it takes 50 basis points before the end of the year to get inflation up then something right away would make that happen sooner. here is a direct quote. maybe shock and awe is the way to go. how likely is that? >> we're probably going to get 50 basis points this year. i don't know if it is shock and awe. the market is pricing as much as three cuts for the rest of the year. i think the fed is getting closer to where the market is but it is not there. anna: to that point, i have to chart the retail sales. this is the latest data point suggesting things on the data
3:04 am
front holding up a lib little. certainly the u.s. consumer side of things. does that add to a rethink that the expectations in bond markets, the bond market is pricing in so much cutting, when we start to see it doesn't look dreadful does the bond market have to rethink some of that pricing? >> i don't know. i think the fed has made it really hard to understand what they are looking at. if you looked a g.d.p. and retail sales and the stock market, the fed has made it clear they are worried about global uncertainties and inflation expectations. i think the market will stick around where it is in pricing for sometime to come. matt: is it possible for central banks to cut enough or to go deep enough into negative territory to outweigh the problems created by the trade war for the global economy? >> i'm very skeptical of that. i think firstly, we are at a point where apart from the fed
3:05 am
there is not a lot of ammunition left by central banks and frankly, if you look at asset market pricing, the gap between asset markets are on the upside and global growth on the downside is the biggest i have seen in over 10 years. anna: what does that tell us? you talked about the gap between the global and business cycle and the risk assets on the other hand. for a long time we were talking about how it was the equity market telling us one thing and bond market telling us something else. you were expecting that to kind of continue and the bond markets were going to rethink their gloomy outlook. where does that leave us then? >> i think it leaves us with some real risks in the global stock market for the rest of the year. they are priced to perfection. maybe the central banks have turn things around. we are at a point where the manufacturing cycle is below 50 for the first time in a number of years.
3:06 am
i think we'll need to see some repricing in global stock markets. matt: is it concerning to you to see so much debt with negative real yields? all over europe, sovereign debt. all over the u.k., japan, and now it looks like the u.s., especially if they cut rates is going to follow. is this a problem with the investment community basically paying to have governments hold their money? >> i think it is a problem and it is an opportunity. it is a problem for investors and an opportunity for governments and one would hope that over time governments recognize that real interest rates, certainly in europe, at below minus 2%. an opportunity to start increasing fiscal spending. anna: even in the u.s.? >> they could have done that. u.s. real yields are a little bit higher but i don't see a lot of fiscal policy coming from the u.s. but there are certainly opportunities in europe. anna: that is where we're going to pick up the conversation next.
3:07 am
thank you very much. our guest stays with us on the program. up next, we'll bring you to moves on the stock market including eriksson with trades lower. really fascinating conversation with the management of eriksson about the extent to which and they have not yet picked up contract wins because of trouble far away. we'll hear about that next. this is bloomberg. ♪
3:08 am
3:09 am
3:10 am
>> we have a long way to go as far as tariffs. we have another $325 billion that we can put a tariff on if we want. we're talking to china about a deal. i wish they didn't break the deal that we had. anna: president trump's latest tariff threat comes a day after the treasury secretary mnuchin says he may go to beijing for more face-to-face talks if phone calls go well with china this week. meanwhile the next president of the european commission says she hopes to disuade president trump from imposing new auto tariffs on europe. she will remind him of all the areas where european and american interests coincide. ursula von der leyen spoke to
3:11 am
bloomberg. >> to convince the united states that it is better we find a good compromise and work together because there are way more issues and problems that concern the two of us together. it will be my way to address it and i think there is a lot of good arguments for working together. anna: for more on the trade story and how it is impacting europe, let's get back to our guest. i have a great chart for you here. it compares france and germany. these two compless structured very differently at a time trade tensions are to the fore. it shows the franco-german spread coming down. france is doing better. germany doing worse. >> i think the misconception is that the euro area itself is fundamentally weak. the fact is it is more or less
3:12 am
at the 20-year average. the real story in europe is the weakness in german industry. it is real. frist ent and it is going to be ound -- persistent and it is going to be around for a long period of time. i think the french economy has been doing well and maybe the reforms that have been put in place in france are starting to bear some fruit. matt: of course the germans have a lot more money than the french. they have a lot more money than anybody else in europe. they are running a giant surplus and they are reducing debt at a time when i think i read that they could sell bonds or negative .4%. that's 10-year bonds. the austrians went out with a 100-year bond for 1%. what are they going to take for the germans who have also got at the same time a crumbling infrastructure problem to actually spend money?
3:13 am
>> yeah, i think it is -- it is coming. i think it is story for 2020. but what you need to see is the weakness and the industry needs to persist and that is something that needs to spill over into the rest of the economy. i would say that the one place where you have seen a little bit of weakness in recent months is the labor market. if that continues then i think fiscal spending in germany becomes a real radar story. anna: based in berlin. the resistance seems to be high. you mentioned this often. matt: there is a cultural resistance. germans don't like to spend money. the question is if you think that is coming in 2020, do you invest on that? is that the fiscal stimulus we need to get us out of this negative rates trap? >> yeah, i do think that if fiscal spending is coming, it is a fundamental game changer for the bunde curve.
3:14 am
bunde yields are obviously at very low negative levels. the bunde curve is pretty flat and if you see that change in thinking around fiscal spending in germany, you should see a higher level of yields across the curve. i think it is too early for that. i do think that is a story for next year. anna: how will the appointment to the e.c.b. relate to this? a lot of people say she has worked not in monetary policy but she has a lot of experience talking about fiscal experience. how is this going to play out in terms of german spending? what do you think? >> i think it is very helpful. if you look at what's happening at the e.c.b., it is in transition. draghi spent a lot ever time there squeezing out every piece of monetary stimulus. christine lagarde has been a spokesperson about the need for more fiscal policy. she has come into the e.c.b. at
3:15 am
a time where they have carried the heavy load. they have to be more fiscal. that 't keep relying on only. i think the fundamental change today is that for the past 10 years, germany has been strong and looks like the industry is now quite weak. matt: we were talking about whether lower rates, beget lower rates. i read again recently thaterdogan thinks cutting rates is going to help bring down inflation. i don't understand his logic there. we definitely see that lower rates are robbing at least the financial sector of 8 to 9 billion euros a year. how much of a problem is this negative rates trap and do you think europe can get out of it? >> i just think the problem is the marginal benefits of
3:16 am
monetary stimulus is falling. that's particularly so in europe where rates are already at very low levels. if the e.c.b. were to restart q.e. as we think they will, how ch more can credit spreads widen? in europe, the marginal value of further easing is going to be pretty small. anna: what are you expecting then from the e.c.b.? they don't have as much firepower as the fed but they have other things they can do. pairing of rates and going back to other policy. what is your expectation? >> we think there will be a 10 basis point rate cut. we think they will restart q.e. we think they will reincrease issuer limits. they will convince the market there is a capacity to buy bonds. that is one of the real concerns that they are running out of monetary ammunition.
3:17 am
which is why inflation is sething at the levels that it is at today performed matt: certainly no shortage of things to talk about in financial news. we're going to keep with us. let's get to our top stories. >> good morning. i want to talk about some of the biggest gainers on the stoxx 600. up 5%. beat estimates. see stronger growth for the rest of the year. morgan stanley this morning before the market opened said they expect the stock to react positively. a lot of it has to do with partly due to the fact that it s undervalue as a stock. swed bank down. even though earnings beat estimates. they are going to be paying out 50% opposed to 75%. they are dealing with a money
3:18 am
laundering scandal. that has set them back. they are the worst performing financial stock in europe this year. ericsson also down this morning. they posted earnings that missed estimates for six consecutive quarters. a bit of a blow this morning. we spoke to the c.e.o. take listen. >> we out our the plan for 2020 and 2022. that's l really what we tried to do. we're on track for that. with another solid quarter under the belt. ericsson. .e.o. of thanks ks anne marie for the movers. up next on the program, sterling trade at its weakest in two years.
3:19 am
contenders to become britain's next prime minister. toughen their rhetoric around brexit. this is bloomberg ♪
3:20 am
3:21 am
♪ anna: welcome back to the european open. 21 minutes into your trading day. european equity markets down on
3:22 am
the ftse 100. the over all picture is not all that bad. flat to negative on the stoxx 600. sterling is trading at its lowest level since 2017. both contenders for britain's next prime minister toughen their rhetoric on a no-deal brecks. i boris johnson would hold an early election while corbyn is still in office. we're still talking with our guest. he is still with us. in the past three months, the pound is the worst performing currency over the majors against u.s. dollar and of course brexit hangs over all of this. interesting to see these headlines, just a report at this point from other sources suggesting there could be an earlier election. we have been here before. interesting to think what that extra uncertainty might do. give us your thoughts on the pound. >> i think the pound is
3:23 am
suffering a triple whammy at the moment. you have very high level offense political uncertainty that are going to pick up as we autautumn.he you have an economy that is on the verge of contracting. too many people assume that is an inventory cycle. the retail sector is under stress. then you are have investors who haven't been engaged in the u.k. story. the market hasn't really been positioned for another move down in the pound. i think that is all clearly conspiring to move the pound a lot lower. matt: is the economic situation without taking brexit into account enough to make this happen? we saw yesterday, employment numbers, well, at least wages that were rising at twice the pace of core inflation. >> yeah. i do think that if you combine
3:24 am
the political uncertainty with the economy, it is enough to get the pound lower and what you have seen in the last couple of weeks is that the economy has brought the bond market into it. bond yields across the u.k. are falling as well. anna: where does this leave the bank of england? you referenced acute economic weakness in your note on the u.k. it doesn't feel that way if wages are going up and unemployment is contained. >> we called for a bank of england rate cut for the last couple of months. we thought it would be the middle of 2020. we now have a base cut for the first cut in 2020. it could be in november. the bank of england is slowly moving in that direction but they are not clearly there yet. matt: the bank of england, if there is a hard brexit, do you expect cuts and how deep, if
3:25 am
the answer is yes? >> the answer is yes. we don't buy into this view that the bank of england will be worried about raising rates into an economy that is probably heading toward recession. i guess we'll start with 50 basis points because that is where they can go and the bank england has expressed a strong aversion to negative rates. anna: how do you think the market is going to itself around. the halloween deadline will creep up on us as soon as we're done with the summer. investors are taking out protection around that particular date. that is the obvious part. how are things going to look to you around that period or just stay away from u.k. assets? >> no, listen. i think it is going to be a difficult time for u.k. assets unfortunately. what i would say is that certainly fx volatility has started to rise but it is still well below where it was a
3:26 am
couple of types in the past year. my guess is that fx volatility needs to be close to the highs over the 2016 period. that is peak uncertainty. are we heading into no-deal brexit or a general election? it gets away from that if the u.k. can get a deal with the e.u. before then. matt: if we are heading into a currency war, is that a question as well? >> i would say across the board, fx volatility is too low. last week euro dollar volatility hit the lowest level of all time, at a point where we're worried about global recession and we're seeing lots of monetary policy movement so trade wars would be an obvious invitation to buy fx volatility. anna: thanks for your time this morning. stay with us here on the program. up next, our interview with the incoming european commission president ursula von der leyen, who aims to convince washington
3:27 am
that the u.s. still has an ally in the e.u. more on transatlantic relations next. this is bloomberg. ♪ we're the slowskys.
3:28 am
3:29 am
we like drip coffee, layovers- -and waiting on hold. what we don't like is relying on fancy technology for help. snail mail! we were invited to a y2k party... uh, didn't that happen, like, 20 years ago? oh, look, karolyn, we've got a mathematician on our hands! check it out! now you can schedule a callback or reschedule an appointment, even on nights and weekends. today's xfinity service. simple. easy. awesome. i'd rather not. matt: 30 minutes into the
3:30 am
trading day, let's get your top headlines. european equities of slide. trump threatens further tariffs on chinese imports. >> we have a long way to go as far as tariffs are concerned. we have another $325 billion we can put tariffs on. we are talking to china about a deal. i wish they did not break the deal that we had. germans defense minister clinches the eu's top job and gives a bloomberg partake on u.s.-eu relations. >> we have issues, but we should
3:31 am
never forget that we are allies and friends. forecasts sales trailing estimates as trade tensions hammered demand for chips. but shares gain on the longer-term outlook. welcome to "bloomberg markets." i am matt miller in berlin alongside anna edwards in london. we are 30 minutes into the trading day and well into earnings season. that is having an impact into what we are seeing. we are fairly evenly balanced in terms of stocks. we are range bound at an overall index level. that is reflected on either side. let's look at what is going on with individual stocks. the biotech sector up by 10.6%. decent numbers out of that business.
3:32 am
swatch is also beating estimates, up by 4.8%. asml, the slightly brighter long-term outlook helping to lift that stock up. let's look to the other side and you can see what is on the losers roster. domestic group, a supplier to the transportation industry, down by 9%. 5.5%, anotherby business we have been speaking to that is cutting their dividend plunge -- pledge. this telefonica group down. let's get a bloomberg first word news update. president trump has said he might impose more tariffs on china. that is after promising to hold off on more duties.
3:33 am
the deal wasrt of for china to buy large amounts of u.s. farm goods, but beijing says no such agreement was made and there have not been any large-scale purchases. china's holdings of u.s. treasuries dipped in may to the lowest in two years. bondsian nations pile of fell by $2.8 billion. it the third straight month of decline. the federal reserve is carefully monitoring downside risk and will act to sustain u.s. growth. that is according to jerome powell. the language was similar to testimony to congress last week. it amended expectations for an interest rate cut later this month. >> uncertainties have increased, regarding trade of elements and global growth. , issues regarding
3:34 am
the debt ceiling and brexit remained unresolved. remained --e been have been raised about a shortfall beyond our target. >> president trump has concerned -- confirmed turkey will not be after ituy a fighter began delivery of a russian missile defense system. trump says they are working through a tough situation. the white house is still weighing economic sanctions. north korea is likely suffering its worst downturn since the 1990's when it was battling droughts and famine and may have lost as much as 10% of its population. it bank of korea estimates contracted by 3.5% in 2017, leaving the economy roughly the same size of the u.s. state of vermont. global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
3:35 am
anna and matt. anna: thank you. back to trade. the next president of the european commission says she hopes to dissuade president trump from imposing new auto tariffs on the eu. she will remind him of all of the areas where european and american interests coincide. she spoke to bloomberg. issues, but we should never forget that we are allies and friends. we sit on the same side of the table, if i might put it that way. therefore, we are going to negotiate the different topics that have to be solved. at the end, we know it is better to be in a healthy way, trading with each other, then other was. -- than otherwise. i will work hard to have a good relationship, knowing there are issues to tackle. , trumpe, unlike defense
3:36 am
has been using tariffs against the eu. another is the threat of levees on european cars. do you have any ideas about how you will address that? >> if you look at the broader picture, things are interdependent. to convince our friends from the united states that it is better to find a good compromise. there are way more issues than problems, would be my way to address it. there are a lot of good arguments for working together and tackling other challenges we have. >> are you positive you can't avoid an escalation in transatlantic trade escalations -- tensions? >> both sides should do that, it is not good for any side. both sides to do their very best
3:37 am
to find a solution. matt: that was the incoming eu commission president ursula von der leyen, the former defense minister in germany. joining us, the former u.s. ambassador to germany. thank you so much for coming into the. -- in today. let me ask you what your reaction is. did she do a great job as defense minister? and because of that success, she has been given a more important job? >> i would not say that. in the end, she was the person everybody could agree on. this is the way the european union works most of the time. she was not a great defense minister, she was an excellent social and family minister and is an experienced politician. if you compare with her predecessors, not naming any names, she is certainly more competent than any of them were
3:38 am
there so we should be positive about her arrival. matt: what i was thinking yesterday, it almost seemed like a new, a green new deal i live aoc -- a la aoc. she had heart the need to address climate change and the opportunity it presents. john: that is the flavor of the month in europe these days, we've had a hot summer. climate change has become a very big issue. is the point here to number that she got into office because the countries put her there. it is increasingly the national governments in the eu that decide what happens. the european parliament is sort of a green oriented thing. anna: talking to parliament yesterday, wasn't she. good to have you with us.
3:39 am
we heard her talking to our colleague about the threat of and the interdependence that has with other matters. does that suggest that the europeans are going to have to give us some ground on something to prevent the u.s. putting tariffs on european goods? john: well, probably. trump,, with president you are never quite sure what his motives are or his next step. seems to like to threaten. the europeans are looking united statesthe because they are not sure how to influence from. i hope they have a catalog -- influenced trump. i hope to have a catalog of things to offer him, because he wants a victory. if they can give him a sense of
3:40 am
victory they will probably be ok. undergerman industry is pressure from the tensions from china and the u.s.. you expect some sort of resolution to those trade tensions ahead of the 2020 election? this has morphed from something just about tariffs to something much more about two rival powers vying for supremacy. john: that is what it is about. powerslso about to rival whose presidents are anything but secure in their political existence. trump looks at the polls and sees he is 10% behind of most of the democratic challengers. xi looks at the internal situation in hong kong and the fact that chinese growth is slowing down tremendously. so each of them have several levels of issues. if it were just trade, that might be one thing, but each of
3:41 am
them have other problems which might be helped by a trade agreement but might not. if we look at the export of cars, for example, it is a huge german issue. it is great for germany to have her at the eu commission, in fact, it is more important for germany than any other country. can she actually do something about the car tariffs? this is donald trumps may concern. if ford wants to sell cars in tariff,of its got a 10% when bmw wants to sell cars, it for if you pay 2.5% could get rid of this one a nominal tariff amongst a sea of numbers, it might appease the present. can she do that? john: i hope so.
3:42 am
i don't think the tariffs are good for anybody, to tell you the truth it goes back to the 1980's when they were worried about japanese imports. but they don't cars in europe also appeared this is not a secret, the automobile industry is global, multilateral, and cars are made wherever it is most useful to make them. bmw is largest exporter of american cars in the united states. so trump told argument is speeches and is politically oriented. i think this tariff on cars the european has, cars the united states not try to sell here anyway, might be a way of getting out of it. but i'm not well enough aware of the political background of it. matt: ambassador, thanks for coming by. the former u.s. ambassador to germany, here with us in berlin. up next, we'll bring you some of the stock movers this morning, including asml.
3:43 am
they make the stuff that makes the chips. trade concerns are higher on the back of second-quarter results. this is bloomberg. ♪
3:44 am
3:45 am
anna: welcome back to the european open them up 45 minutes into the trading day. equity markets are on the back foot but the overall picture is not that sluggish, down .1%.
3:46 am
the german market down .1%, the ftse market down by .2%. some of the biggest names in tech have faced their harshest scrutiny in years. amazon, facebook, google, and apple defended their businesses against claims they are too dominant. exchange, the house share grilled amazon over its use of data. consumer data to favor amazon products. that, analystser estimate that between 80 or 90% of sales go to the amazon by box. you collect all of this data and you are saying you don't use and in any way to change our them to support the sale of amazon branded products? is to predicthm what customers by and we use the same criteria. we want customers to make the right purchase, regardless of
3:47 am
whether it is the seller or amazon. >> but the best purchase to you is an amazon product. >> that's not true. anna: the eu competition commissioner told bloomberg she had similar concerns. >> amazon has this dual role. they are hosting businesses but also competing against those businesses in the very trade they do. into theirre looking use of data to see if this is done in a fair way. bloomberg's opinions european tech columnist and that joins us on set. it was busy yesterday -- analyst joins us on set. it was busy yesterday. amazon says they want customers to make the best purchases. >> yeah. it is interesting looking at the answers they concoct and the way they evade questions.
3:48 am
certainly true amazon would prefer someone to buy a product it makes themselves because they get a greater share of the margin. anna: or it sells itself. >> but what they are particularly suggesting is that they are marketplace -- their marketplace, they see which products are popular and they say we will make one as well. and if they make one, they get a bigger chunk of the margin and are able to deliver greater profits. they are investigating that. matt: i am going to play devil's advocate here. the more important issue for amazon is to be the platform. so they want to make money selling individual products, of course the margins are better. but the genius of what jeff bezos has done is that he is the platform for everything, in the same way google has a platform model, facebook, etc..
3:49 am
don't they want the customer to be happy and come back? regardless of what customers -- what the customer buys? a platform player but are also an asset-heavy organization. they have thousands of employees, you cannot say that for apple, who outsources stuff. samee does not have the assets that amazon has. amazon kind of splits the difference. we can talk about their of as a platform player, but the thing that makes the money is amazon web services. so the effectiveness of that business is not necessarily to do with their platform, it is the things on top of it. anna: thank you very much. let's get to our top stock stories. annmarie hordern has the movers. annmarie: good morning. this is the biggest gainer on
3:50 am
the stoxx 600, up more than 15%. , biotech technology company boosting revenue forecasts for the entire year. asml, they are to the upside. coming out of global growth slowdowns. pretty much unscathed after second-quarter results. while they are forecasting third-quarter sales trailing analyst estimates, they're keeping the outlook -- 2019 outlook the same. to the downside, down more than 2%. it is the biggest silver miner, cutting production forecasts for the year. we have not seen the stock drop that much since april. matt: thanks very much. i want to offer a sincere apology. you may notice we are experiencing some technical difficulties. comee working to fix that in and if anything inappropriate
3:51 am
was her during that time, we apologize to our viewers -- heard during that time, we apologize to our viewers. lvmh's ceo overtakes bill gates to become the second richest person. we look at what is driving his wealth. this is bloomberg. ♪
3:52 am
3:53 am
matt: welcome back to the european open.
3:54 am
we are 53 minutes into the session, and right now, we are looking at a little change. but we do see green arrows on the continent the ftse is still down. over in france, a surge in wealth is playing out on the bloomberg billionaires index. has's ceo bernard arnault overtaken bill gates to become the world's second richest person. that the first time microsoft founder has fallen below second base, -- place, at least since we have been ranking the richest people. joining us is a bloomberg wealth reporter. talk to us about his fortune. why hasn't grown so much this year? -- has it grown so much this year? >> we are talking about the growth of $39 billion in 2019 alone. is this hugeon appetite amongst consumers for luxury.
3:55 am
the ceo of lvmh, the biggest luxury company in the world and it is on fire. been earnings, it has positive in china, incorporating new brands, and that has really boosted his fortune to a level we have never seen. anna: i was going to ask you, how does this compare to europeans? i pulled up the rich function on the bloomberg to take a look at where he is, and there are not as many europeans at the top. >> there are a few europeans in the top 10 and arnault is a richer than the second european. anna: so clothing seems to be the way forward for european richness. >> americans, it is much more tech, but in europe, it is luxury or industrials. matt: he is not going to top jeff bezos, right? he has a huge lead, almost double that fortune.
3:56 am
>> bezos is a few billion ahead. and really, he has narrowed that lead just because of his divorce, recently. it seems unlikely just because amazon is performing well. anna: thank you for bringing us that story. -- iso is to keep track the function to keep track of all those billionaires. stay with bloomberg television. the european equity market is just turning tail as we head towards the end of the first hour of european equity trading. stoxx 600 up by .1%. in general, we are caught between a better picture in the u.s. but the trade rhetoric continues, and amongst all of that, the market is finding it difficult to settle on a narrative. matt: that's right. we've had trouble for two sessions, really. finding a direction, are the
3:57 am
rate cuts from central banks around the world going to outweigh the global growth rate -- break? we will talk more about that. this is bloomberg. ♪
3:58 am
3:59 am
4:00 am
nejr further tariffsa: -- president trump wants he could impose more tariffs. jay powell says the central bank is monitoring risks. ursula vander line clinches the european union's top job. >> we have issues, but we should never forget that we are allies. we sit on the same side of the table. ♪ welcome


info Stream Only

Uploaded by TV Archive on